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How to earn upto 9% interest on your Savings account Balance?

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sweep-in-fd

Yes. You read it right. In this post, I will explain how to earn upto 9% interest on your idle savings account balance.

Option 1  –   Choose High Interest Saving Account

Typically banks give 4% interest on savings accounts. However, after RBI de-regulated the savings account interest rates, few banks are offering higher rates.

Bank / Rates Balance upto 1 lakh Balance above 1 Lakh
Yes bank 6% 7%
Kotak Bank 5.50% 6%
IndusInd Bank 5.50% 6%

So, you can get maximum of 7% interest from your savings account.

 

Option 2  –   Choose Sweep in / Out Facility on your Savig Account

But, let’s see how you can increase your returns upto 9% using “Sweep In/Out” facility.

A.  What is this “Sweep in / out” facility?

This is like a combination of Savings account & Fixed Deposit account.

It combines benefits of both accounts –

  • High Returns of Fixed Deposit &
  • Quick encashment (Liquidity) of Savings Account.

sweep

B. How it works?

Most of the times, you have idle money sitting in savings account than you actually use it. But, you don’t invest it, because you think that you might need it, for e.g. in emergency.

So, in such cases, “Sweep in/out” facility comes handy.

Sweep facility allows you to transfer funds (automatic / manually) from your saving account to a “Virtual” Fixed deposit account and earn high interest rate.

And it automatically transfer money back from FD to savings account as and when required (cash withdrawal/ cheque etc).

1) An FD is made for the whole amount which earns higher interest rate.

2) When you withdraw money, an equivalent amount is reduced from your FD & auto transferred to saving account. You earn FD interest on that amount till the date of withdrawal. For the balance amount, you continue earning FD rate of interest.

C. Let’s understand through an example

Suppose you have savings account balance as on 01-Apr & then withdraw money periodically as per schedule below:

sweep1

sweep2

In case of just normal saving account, you will earn interest of Rs 3400.  However, if you avail sweep facility, your returns will increase to approx Rs 7487.

 

D. What will happen when I withdraw money / issue cheque / online purchase?

Suppose you want to withdraw / issue cheque of Rs 25000. Don’t worry; your cheque WILL NOT bounce.

The money will be swept-in from your FD account to your saving account automatically.

E. Points to note

  • Some banks define the minimum saving bank limit above which the FD is made automatically while others allow you to choose minimum saving balance.
  • Some banks allow the FD for defined tenure only while others allow you to choose FD tenure.
  • Some banks sweep-in the FD into multiple of 5000 or 10000, while others do it in multiple of Rs 1.
  • Some banks break the FD in First-in-First-Out basis while others do it on Last-in-First-out basis.

F. How to enable this Sweep in/out facility

Different banks have different names for such accounts like Supersaver facility, HDFC SavingMax Account, Kotak ActivMoney, ICICI Money maximiser etc

You have two options:

1) Auto Sweep-out facility & Sweep inIn this facility, Bank will automatically sweep-out/ transfer money from your saving account to Fixed deposit, once your saving balance is above threshold limit say Rs 50,000.

Visit your branch and ask your relationship manager to enable the “Auto Sweep / Sweep-in” facility on your account. Sometimes, they will enable this facility on your existing account or they can open a new savings account with this facility.  To open a new saving account, you just need to sign the form as bank already have your documents.

Advantanges: FD is created automatically once the balance of saving account is above threshold limit.

Demerits1) You loose FD interest on amount defined as threshold limit (just savings interest on that amount)

2) Tenure of FD is standard set by bank. Normally 1 year. But sometimes you get higher interest if you make an FD for odd periods like 1 year 16 days etc.

2. Just Sweep-in facility: In this facility, you just have to create a normal FD online and then select this FD to enable sweep-in option. This is default feature in many banks.

Merits: You get FD interest on whole amount.  Also, you can choose your tenure of FD based on higher interest rates.

Demerits: You have to create FD yourself through netbanking. It is not automatically done. So you need to remember to make FD when you get money in your saving account.

 

Read my other post –  SBI Savings Plus Account with MOD High Interest Scheme – Details & Review

See my other post on – How to use Sweep-in facility in HDFC Bank via Net-banking (with screenshots)

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please ask in our Wealth18.com forum

http://wealth18.com/forum/index.php

About Vivek Jain

Vivek is a Chartered Accountant with 13+ years of Global Experience. He loves to write about Personal Finance, Wealth Management, Taxation etc.

59 comments

  1. Is YES bank is having sweep in / out facility?

  2. Hi my mom is a house wife.After the expiry of my father she received PFs,gratuity from bank where he was working .That amount was deposited in Savings bank A/C for which she has received interest of approx 80k. This is her only income, for this should we file return.

  3. Fantastic post, thanks for sharing!!

  4. Very well explained and extremely helpful..Great Work!!

  5. Is it possible that you are able to calculate interest earned in sweep in sweel out facility.
    Is there some software/ formula

    • Hi, It will depend on the number of days the amount was in sweep in/ out. If is is more than 3 months then it will compund, otherwise simple. also the Interest rate will eb different for durations.

  6. HI!! does sbi have sweep facility? if yes, how to avail that ? and is there any condition that we should have some minimum balance to get sweep facility?

  7. Hi, can you please explain what is the difference between LIFO & FIFO breaking of FD?

    • LIFO breaking of FD means that the Last FD will be break first in case of shortfall.
      e.g.
      1) You have FD for 10000 for 1 year @ 9% starting on 01-Jan-2014
      2) You have another FD for 10000 for 1 year @ 9% starting on 01-Jul-2014

      If you have shortfall in your account, first the money will come out of 2nd FD made on 01-Jul (in LIFO Method).

      This will ensure that old FD is not broken.

  8. I have 6lakh in sbi savings account. How can I use this money to get more interest? Please help me…

  9. Shuvankar Sannyamot

    thanks,can you please tell me what is the name of this account in UCO and SBI?

  10. Dear. I want to know that. In how many days icici bank transfer interst on saving account..

  11. Hi Vivek,

    You’re really good in answering. It’s me again for SBI related query now :)

    Last day after reading your post i enable e-MOD facility in my SBI account using netbanking. But neither it asked for threshold limit here and neither it took all the money lying in saving account to this e-MOD. It simply created another deposit account just like an e-FD. Where am i doing wrong?

    Again , how e-MOD differs from SavingPlus account of SBI.
    Regards
    Saurabh

    • Hi Saurabh,

      When you create an e-MOD under SBI Netbanking, you need to choose 3rd option. see below

      In that case, you need to enter the amount & tenure for which you need to make the e-MOD deposit. You can issue cheque from your saving account and if money is short in Saving, the money from this e-Mod will come automatically.
      —————-
      2) SavingsPlus Account is where the money is moved automatically to e-MOD account above defined threshold. See details in post bleo:

      http://wealth18.com/sbi-savings-plus-account-with-mod-high-interest-scheme-details-review/

  12. Hi vivek,

    Yes , i have followed same steps as mentioned above.

    So, it mean e-mod is just like a sweep in of hdfc.

    Auto Sweep out above threshold is not a feature of e-mod? am i correct only sweep in is available.

    Regards
    Saurabh

  13. Hi Vivek,

    That’s answer my query for SBI.

    Saurabh

  14. Dear
    Currently I m working with a pharmaceutical company. company providing Gross salary approx 25k but deducting pf on 6500 only.
    After this new notification by epfo any change will take place, that we wants to go on more than 15 k.
    Thanks.
    Plz replay.

    • Hi Vikash, With the new notification, your company will have to deduct PF on 15000. they might not increase your salary but re-structure your gross salary.
      In such case, it may reduce your take home salary. That will not be good for employees.

      • Hi Vivek,

        I work in a delhi based pvt. ltd. co., my monthly gross is approx 35k, but basic is 6.5k (it’s fixed & doesn’t increase with increment). does this new notification would help me for investing in pf.Is there any law to increase basic as well?

        Awaiting your reply.

        Rgds,
        Suneel

  15. Hiiiii sir , what is the meaning of
    avail bal:5000,
    Ledger bal:5000
    FFd:0
    Idbi bank account
    What is it mean sir can you explain
    When i went to i select balance enquiry the above statement what is avail bal ledger bal and ffd

    • Hi Surya. it shows the balance in your account.
      available balance – amount available for withdrawal
      ledger balance – amount in banks ledger
      normally above are same

      ffd – may be fixed deposit balance

  16. Hi,
    Thank you for this post. My question is regarding minimum balance, which is 10,000 in this account. If I have 1 lakh in e-mod FD, 10,000 in saving account and I issue a check for 25,000. Now my saving account will debit 10,000 and 15,000 will be debited from FD.
    After this will the bank shift 10,000 to my saving account from the FD (to maintain minimum balance) automatically or will I have to do this on my own? Because if this does not happen my saving account balance will be zero, and I will have to pay charges.

  17. sir,
    i want to know how calculate interest in saving a/c after the sweep in/out facility.

    • Hi Deepak, The Interest in Saving account will be calculated to the daily balance available in Saving account. (after sweep out)

  18. Dear Sir,

    Please guide me in the below situation.

    Recently i sold my house for 75lakhs. I have all the liquid money. I would like to enjoy my life with my family(6 members).
    i would like to live on with the interest i get on 75 lakhs. I dont want to lose single rupee as tax or something. All six members have bank accounts, and my idea was to distribute 75L in 6 accounts and avail interest which will be ample to lead a life with the interest amount. Please guide me how to distribute and how to choose the account and how to get maximum amount as interest.
    Please suggest which bank and which type of account could fetch me all benefits that could satisfy my requirements. Also, i could access my principal amount of 75 lakhs anytime in case of emergency.
    I decided to live like this as i want to explore all the happiness with family and also acheive all the hobbies i would love to with no tension and second thought regarding earning.
    Please advise me regarding this idea and suggest me a good way to fulfill my dream.

    Thanks in advance.

    • Hi Vishnu, As the minimum tax exemption slab is Rs 2.5 lakh, we can safely assume that FD of Rs 25 lakh will give an interest of less than Rs 2,5 lakh limit.

      So if you distribute money to 3 different members, then each of them can make FD of Rs 25 lakh and eaen interest.

      Note that if the amount given to wife / minor children without any consideration, then any interest earned will be clubbed to your income.

      • Dear Vivek,

        few more queries:
        * will i get the interest everymonth to use like a salary
        *Which type of FD should be done?
        * would it be possible to access the principal amount in case of emergency?
        * Will FD avail any charges/ penalties if withdrawn?
        Can you please elaborate how it works like an example. Consider this as my special Request and pls explain me.

        Thank you in advance.

        • Could you please let me know
          1) in which bank you have account or planning to have FD
          2) What will be your monthly income requirement
          3) for how long you can keep this money in FD?

          • Hi Vivek,

            Here are the answers

            1. Rite now i have accounts in SBI, Andhra Bank,canara bank,APGB and IDBI bank.
            2. My monthly requirement would be 50k to 60k. As half amount for rent, car and household expenses and the other half for chits.
            3. 2 to 5 years.

          • Hi Vishnu, If you make FD for Rs 75lakhs for Interest @9% , you will get approx Rs 56000 per month for your requirements.

            I think the best option is to split the amount into multiple FD as in case of emergency you can break required amount. For e.g. if rather than making 1 FD of Rs 25 lakh, you can make 10 FD of Rs 2.5 lakh each.

            Make sure every member has PAN updated in their bank account. because if no PAN is updated, bank will deduct TDS @20%.
            If PAN is updated Bank will deduct TDS @10% which you can claim by filing Income Tax returns.

  19. Dear Mr. Vivek Jain,

    I am an NRI and i have most of the time surplus cash laying in my savings account in india. Please suggest me how can i maximise the returns on my savings.

    Thanks

    • Hi Surendra,

      Could you please let me know the following :

      1) Do you have Income in India which is getting credited to Local Savings Account ? or have just lump-sum amount.
      If you can indicate the amount which you want to invest ?

      2) Do you have NRE Account to transfer money from overseas to India. I am asking this as any Interest earned on NRE FD is tax free.

  20. Hello,

    If I open an FD for 10 lakh with HDFC for a Year and 1 Day and want to withdraw the FD in between say after 3 months or 6 months. How do I ensure there are no or minimum charges levied for breaking FD.
    On your earlier note regarding FD opened in the name of wife, who will club the interest with my income. Is it the Bank or the IT department?

    Thanks
    Ranjith

    • 1) If you break the FD after 3 or 6 months, then you will be paid the interest rate applicable for 3 or 6 month period – penalty interest.

      2) The income will be clubbed as per Income tax rules. It is your responsibility to show correct income. If not, the same can be assessed by Income tax officer at time of scruitny.

  21. Wow! This is pretty awesome and easy to understand. I’m more of a saver than a spender and much of the money I make is sitting idle in my accounts. So I will definitely put the sum to better use now. Just one question, which bank do you recommend for the Sweep In facility? I mean which is the most hassle free service provider?

  22. Hi

    I given the application to my SBI faridabad Branch to convert my Saving account to Saving Plus account.
    Can you Please let me know how i can check whether my account is converted to saving Plus or not ?

    Br
    Deepak

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